You know my position on Sumner-he's a nice guy and has a clever pitch but what is NGDPT is basically is a call for backdoor austerity-that is he's a Paul Ryan Republican.
Mind you despite the constant harping of his alter ego, Morgan Warstler, he usually does a good job of keeping his partisanship under wraps. However a comment I left today led him to say the most nakedly partisan thing I've ever heard him say yet.
He had a post that attacked the Buffett Rule. Now note this is somewhat unusual for him. He normally sticks to monetary policy and when he strays into fiscal policy he's usually pretty humble and says 'hey, I'm no expert on any of this but here's what we should do..."
He does talk about "structural reforms" and "supply side problems" but usually only in pretty vague and general terms. He will sometimes suggest that we have supply side problems-"structural"-but that right now he allows that's not the main problem that at present it's a demand shortfall. Note that doing this reassures his many readers who are Keynesians or liberals.
Yet he said something this morning in his earlier fiscal post-"Austerity and Stimulus in Northern Europe" that no decent Keynesian could hold any truck with:
"If the Keynesians are to be believed we have savage cuts in government spending in America, despite data showing spending levels much higher than before the recession. You can cut the numbers anyway you want, and get whatever result you want. One of their favorite techniques is to explain away the high government spending by pointing to the depressed state of our economies, even though most private forecasters see this as the new normal, RGDP will never recover to the old trend line in either the US or UK."
http://www.themoneyillusion.com/?p=14381
So now we're just presuming Tyler Cowen's Great Stagnation? Here are Sumner's Buffett Rules comments:
"There’s nothing more dismaying that seeing progressives revert back to the mistakes of the past. I’m talking about the renewed interest in super high top marginal tax rates. Rates even the Nordic countries abandoned years ago. Even worse, they want to apply the taxes to income, not consumption. As if higher taxes are going to make Buffett move into a smaller house in Omaha, rather than cut back on his donations to the starving kids in Africa."
"Those who have taught economics know that some points that are seemingly obvious can go right over the heads of most students. For example, subsidies are negative taxes, and hence have the opposite effect of tax increases. If taxes raise prices, then subsidies cut prices. (I kid you not, many students think a tax will be passed on to consumers, but a subsidy will be pocketed by corporations. Why you ask why, they actually think it’s in the corporation’s interest to pass on tax increases, and pocket subsidies. By which logic a $20 tax combined with a $20 subsidy, i.e. a “nothing,” would cause prices to rise by $20. Go figure.)"
http://www.themoneyillusion.com/?p=14397&cpage=1#comment-157832
I responded with this:
"Obama wants to bring the top marginal tax rate to 39.6% and impose a small millionaire tax and end a few subsidies like the oil companies get in particular."
"I don't see much proof looking at gas prices that their subsidies are being passed to the consumer.
None of this qualifies as very high rates-the days of very high rates was when we had a top rate of 75%."
"Mind you when you consider the fact that while today’s top rate is 35% the effective top rate is only 17.3% you see that in today’s terms a 70% rate would merely get us what we supposedly are asking for today."
"You could almost write a formula-the effective rate is always about half the nominal rate."
Overall I remember the age of the sinister 39.6% rate-even dividends were taxed this “job killing” rate-and it didn’t seem to hurt the economy at all. In fact the economy was never better. So I’m not buying the idea that raising taxes on the super rich hurts the little guy."
He answers my comments with this:
"Look, if you are going to blog on taxes you’ve got to stop believing the Obama lies–he is advocating top rates above 39.6%, indeed with no change in the law the federal top rate will hit about 43% next year."
"Why would oil companies not pass on the subsidies to consumers? I thought they were greedy. Are you claiming they aren’t greedy? And where is your “evidence.”
Notice that he's never gone there before. Now he's calling Obama a liar sounding like just another Right wing talking head-finally letting his inner Rush Limbaugh come out. Usually he effects to be above party. Note how he assiduously ignores my point that the effective tax rate is about half the nominal? Even if it's "really 43%" this is still hardly "very high." Again apply my "Sax Rule" and you see that even this is really only a 22% tax rate.
I don't think investment will dry up. Here were my comments in response to his comments:
"The nominal top rate would go from 35 to 39.6 percent. This was what they were under Clinton. But really whether 39.6 or 43 it’s far from the 70 it was until Reagan."
"It seems to me that the GOP made a really bad deal in the debt ceiling last year. Where’s their leverage to stop the Bush tax cuts form expiring especially as they say they won’t negotiate, are just demanding nonmilitary spending cuts and demanding that the already agreed on military cuts are ended-they wont get that either."
For more please see
Boehner’s Debt Ceiling 2.0
http://diaryofarepublicanhater.blogspot.com/2012/05/boehner-debt-ceiling-chicken-20.html
“Why would oil companies not pass on the subsidies to consumers? I thought they were greedy. Are you claiming they aren’t greedy? And where is your “evidence.”
"My evidence is that no one thinks gas prices are cheap. There’s certainly no evidence that they have passed the subsidies to the consumer. There are plenty of things they can do with it besides giving the consumer a break: retained earnings, a stock dividend, or maybe in new research and development. Or maybe in another bonus to their CEO… "
"The possibilities are limitless besides giving them back to consumers. That’s just one thing they could do with the subsidy."
If anyone out there wants to dispute my characterization of Scott as a Paul Ryan Republican be my guest. Here's how to decide it. Name me one substantive thing in-again substantive-in the Paul Ryan budget do you think he disagrees with?
I can guarantee he loves the huge tax cuts for the rich and the corporations. He loves setting Medicare out to pasture on Ryan's block grants. Or Herman Cain's 9-9-9, what do you imagine he disagrees with on that? We know he loves the idea of a new 23% national sales tax as he loves consumption taxes:
"There’s nothing more dismaying that seeing progressives revert back to the mistakes of the past. I’m talking about the renewed interest in super high top marginal tax rates. Rates even the Nordic countries abandoned years ago. Even worse, they want to apply the taxes to income, not consumption. As if higher taxes are going to make Buffett move into a smaller house in Omaha, rather than cut back on his donations to the starving kids in Africa."
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